Borr Drilling upsizes; Anywhere Real Estate pops post-earnings; Coinbase rises in junkland

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 24 – In the junk bond primary market, Borr Drilling Ltd. priced a modestly upsized $1.54 billion offering on Tuesday.

Meanwhile, it was a strong day in the secondary space as buyers returned to the market as Treasury yields retreated from their multi-decade highs.

The market was once again reassessing the macro situation with the view that the climb in Treasury yields would negate the need for future rate increases gaining prominence as macro data continued to point to economic strength.

The latest Purchasing Managers’ Index came in better than expected, depicting companies’ continued fundamental strength and raising optimism for earnings, a source said.

The cash bond market climbed 3/8 to ½ point amid the renewed risk-on sentiment, a source said.

Venture Global LNG Inc.’s recently priced senior secured notes (B1/BB/BB) continued their climb with the notes rising alongside the broader market.

However, topical and earnings-related news drove the largest gains in the space.

Anywhere Real Estate Inc.’s senior notes popped 2 to 4½ points after the company reported earnings.

Coinbase Global, Inc.’s senior notes (B1/BB-) also made large gains in active trade as market expectations for Bitcoin ETFs rise.

New deals

In the Tuesday session, Borr Drilling upsize its two-part offering of Borr IHC Ltd. senior secured notes (B3/BB-/B) to $1.54 billion from $1.5 billion, whereupon it priced and allocated the deal.

A $1.025 billion tranche of 10% notes due 2028 priced at 97.5 to yield 11.117%. The coupon came at the tight end of the 10% to 10¼% coupon talk. The issue price came on top of price talk.

A $515 million tranche of 10 3/8% notes due 2030 priced at 97 to yield 11.378%. The coupon came at the tight end of the 10 3/8% to 10 5/8% coupon talk. The price came on top of price talk.

The deal was playing to $3.5 billion of demand across both tranches when price talk circulated on Tuesday morning, according to a trader.

In the wake of the Borr Drilling deal two more sizable offers remain on the active forward calendar.

Cetera Financial Group Inc. is marketing a $700 million offering of Aretec Escrow Issuer 2 Inc. senior secured notes due August 2030 (B2/B).

Initial guidance has the notes coming to yield in the high-9% to 10% area.

Demand was heard to be $600 million, with some hearing that orders for the new Aretec/Cetera bonds are running as high as $1 billion.

The brief roadshow was set to wrap up Tuesday.

Meanwhile the Global Aircraft Leasing Co., Ltd. and Global Sea Containers II Ltd. $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-), which has been in the market for a fortnight, is lately heard to be in limbo after the company rejected covenant changes demanded by an investor representing an anchor order, which would have taken the book above deal-size, sources say.

The co-issuers are in the market in order to raise cash to pay off $1.911 billion of Global Aircraft 6½% senior PIK toggle notes due September 2024.

Global Aircraft made three PIK payments on those 6½% notes during the height of the Covid shutdown, and investors are keen to incentivize the company to make interest payments on the new notes in cash, sources say.

The issuers addressed that concern in the new deal’s structure, with a novel 200 basis points pay-in-kind step-up (the customary PIK step-up has been 75 bps).

However, investors want additional guarantees and pledges of assets, sources say.

Venture Global climb continues

Venture Global’s most recently priced tranches continued to climb as broader market conditions improve.

The liquefied natural gas producer’s 9½% senior secured notes due 2029 added another ¼ to ½ point.

The notes were trading in the 101½ to 101¾ context heading into the market close, a source said.

There was $40 million in reported volume.

The 9 7/8% senior secured notes due 2032, which priced at 99.214, broke above a par-handle.

The notes also added ¼ to ½ point to close the day in the par ¾ to 101 context.

There was $29 million in reported volume.

In its third pass at the junk market in 2023, Venture Global priced a $2.5 billion tranche of the 9½% notes at par and a $1.5 billion tranche of the 9 7/8% notes at 99.214 to yield 10% on Oct. 19.

The notes priced amid the heavy market conditions of the previous week and dropped below their issue prices after breaking for trade.

However, they have seen a surge in buying interest over the past two sessions that have propelled them higher by 1½ to 2 points.

Anywhere’s earnings

Anywhere Real Estate’s senior notes were the major gainers of Tuesday’s session after the company reported earnings.

The real estate services company’s 5¾% senior notes due 2029 (B3/B-) jumped 4 points to a 67-handle.

They were changing hands in the 67¼ to 67½ context heading into the market close, according to a market source.

The yield was about 15%.

The 5¼% senior notes due 2030 also jumped 4½ points with the notes closing the day on a 65-handle.

They were trading in the 65 to 65¼ context heading into the market close with the yield about 13½%.

Anywhere Real Estate’s 7% second-lien senior secured notes due 2030 (Ba3/B+) jumped 2 points to an 84-handle.

The notes were trading in the 84¼ to 84½ context heading into the market close with the yield about 10 3/8%.

The notes made large gains in heavy volume after the company delivered better-than-anticipated revenue and reduced its debt by $281 million, a source said.

The debt reduction was aided by Anywhere Real Estate’s August exchange of a portion of its 5¾% senior notes due 2029 and 5¼% senior notes due 2030 for new 7% second-lien senior secured notes due 2030.

In the exchange, the company offered $800 in principal of the new 7% notes per $1,000 of the 2029 and 2030 notes tendered in the exchange.

Coinbase rises

Coinbase’s 3 3/8% senior notes due 2028 and 3 5/8% senior notes due 2031 climbed 1½ to 2 points in heavy volume with market expectations for Bitcoin ETF approval high.

The 3 3/8% senior notes due 2028 jumped to a 73 handle.

They were trading in the 73¼ to 73½ context heading into the market close with the yield about 10 3/8%.

There was $8 million in reported volume.

The 3 5/8% senior notes due 2031 jumped 2 points to break above a 68-handle.

The notes were trading in the 68½ to 69 context heading into the market close with the yield about 9¼%.

There was $10 million in reported volume.

Crypto names were once again hot with Bitcoin surging after a U.S. appeals court ordered the Securities and Exchange Commission to re-review Grayscale’s application to transform its Bitcoin Trust into an ETF.

The order solidifies Grayscale’s victory in its battle with the SEC for denying its Bitcoin ETF application and paves the way for SEC approval of other Bitcoin ETFs.

Several institutional investors have Bitcoin ETF applications pending with the SEC.

Coinbase is listed as a partner in several of those pending applications.

Fund flows

The dedicated high-yield bond funds had $842 million of net daily cash inflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $703 million of inflows on the day.

Actively managed high-yield funds had $139 million of inflows on Monday, the source said.

The combined funds are tracking $362 million of net outflows on the week that will conclude with Wednesday’s close, according to a market source.

Amid the geopolitical tensions and gyrating risk-free rates the buy-and-hold high-yield bond accounts are sitting on slightly more cash than usual, but not dramatically more, according to the portfolio manager.

Indexes

The KDP High Yield Daily index fell 35 bps to close Tuesday at 48.07 with the yield 8.25%.

The index was up 13 bps on Monday.

The ICE BofAML US High Yield index gained 37.6 bps with the year-to-date return now 4.556%.

The index added 23.2 bps on Monday.

The CDX High Yield 30 index gained 42 bps to close Tuesday at 99.73.

The index gained 31 bps on Monday.

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